MMR may sound death knell for packagers

The Association of Mortgage Intermediaries has warned the mortgage market review will be the death knell for mortgage packagers unless they radically restructure operations.

The FSA’s final MMR consultation published last month says lenders will be held responsible for verifying income and assessing affordability when the MMR is implemented.

AMI director Robert Sinclair (pictured) says: “One of the bigger questions is what happens to the packager community at the back end of this. The paper clearly sets out that the FSA wants people to be responsible for what they do.

“Do I think this is the final nail in the coffin? Clearly they are on notice that their shelf life will be limited unless they can convert to a different structure.”

Mortgage packager All Types of Mortgages managing director Dale Jannels, who estimates there are around 12-15 packagers currently operating in the market compared with around 80 before the crisis, says: “We have had to adapt since 2007 with everything that has been thrown at us. It may mean we will have to adapt to change but it will only be what we have been doing for the past four years.”

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Comments

Every time there is a twist or turn in the market, the same story appears. Packagers, like us, have been evolving for years.

We added enormous value when sub-prime mortgages were available. Now, unless your customer is A1 a residential mortgage is off limits.

We have always offered secured loans, commercial mortgages and buy-to-let finance. Now, that is our main offering. The dynamics in these markets mean that the availability of finance and the criteria are constantly changing. That’s not something that can be said about the home mortgage market at the moment.

We provide access to products that brokers don’t have access to or where they don’t have the full knowledge required to get the application to completion. Many brokers are focused on residential mortgages and only get the occasional secured loan, commercial mortgage or buy-to-let enquiry. There is little value in them gaining and maintaining the knowledge to process these enquiries for a few applications a year. That’s where we add value.

If and when sub-prime mortgages return, that market will likely be served by specialist lenders and they, once again, will want to ensure that they are getting the right mix and quality of business. Packagers exist to provide that service. We also act as a one-stop front-desk for the lenders so that they don’t get bombarded with enquiries from every person declined by their bank. Brokers get access to the entire sub-prime market with one phone call.
When sub-prime does return there will also be much heavier underwriting requirements than before and again, packagers will exist to deal with that increased workload and the very specific requirements.

Brokers need not fear us either. We don’t sell tag-on products and we never cross-sell in the future. We also don’t have a direct-to-consumer arm so we are not competing with brokers, we are a committed supplier to client-facing intermediaries. If a broker has an application they can’t deal with, surely they are better placed contacting us? We can get it to completion and the broker retains the client rather than run the risk of having them find another broker who can deal with the enquiry and then retain the client themselves for future business.

As I mentioned in my opening remark, we are very much alive and kicking. We are also adapting and planning to be so for quite some time yet.